NEW DELHI, Feb 14 India's determination to
pursue trade with Iran despite Western sanctions could be
undermined as wary exporters back away from fresh deals after a
bomb attack in New Delhi blamed on Tehran, a trade association
chief said on Tuesday.

Up to now India has not gone along with new financial
sanctions imposed by the United States and European Union to
punish Iran over its disputed nuclear programme. Instead, New
Delhi has come up with elaborate trade and barter arrangements
to pay for oil supplies.

However, the president of the All India Rice Exporters'
Association said Monday's attack on the wife of an Israeli
diplomat in the Indian capital will damage trade with Iran and
may complicate efforts to resolve an impasse over Iranian
defaults on payments for rice imports worth around $150 million.

"The attack and its political fallout have clearly vitiated
the atmosphere. Traders who were already losing money due to
payment defaults will be extremely wary of continuing their
trade with buyers in Iran," Vijay Setia told Reuters.

"After all, no one wants to lose money or block it for that
matter. With mounting tension, the ECGC will altogether stop
giving insurance cover to Indian exporters," he said, referring
to the state-run Export Credit Guarantee Corporation of India
that covers the risk of Indian exporters selling on credit.

The head of a large New Delhi-based exporter said the ECGC
was no longer covering consignments to Iran due to the risk and
uncertainties involved.

"Some traders are trying for the ECGC cover even at
reasonably higher premiums," said the executive, who asked not
to be named due to the sensitivity of the issue. "But Monday's
incident has made everyone very suspicious."

ECGC officials were not immediately available to comment.

The Commerce Ministry, which is still planning to send a
large business delegation to Iran this month to explore how to
boost exports, declined to comment.

BALANCING ACT

Israel accused arch-enemies Iran and its Lebanese militant
ally Hezbollah of being behind twin bomb attacks that targeted
Israeli embassy staff in India and Georgia on Monday. Tehran has
denied involvement in the attacks.

Deputy Israeli Prime Minister Dan Meridor forecast a boost
to bilateral relations with India as a result of the incidents.

"India is an important country - important in the world,
important to Israel. India, to my regret, did not join the
sanctions against Iran," Meridor told Israel's Army Radio.

"I think that if it becomes clear that Iran, or Iranian
intelligence, or Iranian-inspired Hezbollah, used India in order
to carry out terrorist attacks, the diplomatic realm as well as
the intelligence cooperation between Israel and India can be
activated," he said, without elaborating.

India said on Tuesday it was still unsure who was behind the
attack on the Israeli woman's car by a motorbike rider who
attached an explosive to the rear door and fled. It has been
pointedly silent on Israel's accusation that Tehran was the
culprit.

"Sleeper cells of jihadi operatives could have been given
the job by those behind the blast," said Anil Bhatt, a retired
Indian army colonel and independent defence analyst.

The bombing took place in broad daylight some 500 metres
from Prime Minister Manmohan Singh's residence, prompting
accusations that security is weak in Indian cities. Just last
year, 11 people were killed by a bomb at New Delhi's High Court.

New Delhi has good relations with both Iran and Israel, and
so the attack makes its diplomatic balancing act between the two
countries all the more difficult, and has thrust the mounting
tension between the Middle East rivals onto its doorstep.

Israel is the second-largest supplier of arms to India.
But India is Iran's biggest oil buyer, relying on it for about
12 percent of its needs, and it is Tehran's top supplier of
rice. On the diplomatic front, India regards Iran as an
important partner to protect its regional interests when U.S.
troops are withdrawn from Afghanistan.

India is considering stepping up exports of a range of
goods, including wheat and rice, to settle part of its $11
billion annual oil bill to Iran. The two sides have been
seeking alternative payment mechanisms to settle their trade
after existing conduits have either been scrapped or become
vulnerable in the face of the West's sanctions.

The payment problems have recently led Iranian buyers to
default on purchases of about 200,000 tonnes of rice from India
worth some $144 million.

Last week an Indian official sounded a defiant note over
mounting diplomatic pressure from the United States and Europe
to follow their sanctions on Iran.

"There are U.N. sanctions which India honours, those don't
cover the export of a vast range of products which India can
export to Iran," Trade Secretary Rahul Khullar said.

"If the EU and the U.S. both want to stop exports to that
country, please tell me why I should follow suit? Why shouldn't
I take up that business opportunity?"

Lisa Curtis of the Heritage Foundation's Asian Studies
Center said in a column on www.reuters.com that India will find
it increasingly difficult to placate both Iran, on the one hand,
and the United States and Israel on the other.

"The skills of Indian strategists who seek to balance
India's role as a growing global power with its need to guard
against the prospect of rising regional instability will be
tested in coming months as the international confrontation with
Iran intensifies."
(Writing by John Chalmers; Additional reporting Ratnajyoti
Dutta, Satarupa Battacharjya, Matthias Williams and Dan
Williams; Editing by Mark Heinrich)

ZURICH, Dec 9 Swiss luxury good company
Richemont has reached an agreement with employees on a
new round of job cuts, a labour union said on Friday, adding
that the layoffs were smaller than originally planned.

ROME, Dec 9 (Thomson Reuters Foundation) - Breaking the
cycle of drought and hunger in Southern Africa, where 39 million
people are suffering a drought-induced food crisis, will need
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commodity prices, food experts said on Friday.

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